General

General

What is an Exchange-Traded Fund (ETF)?

An ETF (Exchange-Traded Fund) is a type of investment fund that holds a collection of assets (stocks, bonds, commodities) and trades on stock exchanges.

ETFs can be bought or sold on exchanges like individual stocks and are settled similarly. They offer the benefit of mutual funds (pooled investment, diversification, professional management) and stocks (real time trading). Generally, an ETF tracks a specific market index (NIFTY, SENSEX) and aims to mirror the performance of the index. Some ETFs track an underlying asset (GOLD, SILVER) and reflect the price of the asset.

Features of ETF

1. Like a Stock: ETFs trade like stocks on an exchange. You can even place intraday orders or buy ETFs using MTF

2. Like a Mutual Fund: ETFs are managed professionally and are like a basket of securities, reducing risks associated with individual stocks. You can even invest through an SIP in ETFs.

3. Low Cost: ETFs have a lower expense ratio as compared to active funds.

4. Transparency: Holdings are usually public and are disclosed daily.

Did You Know?

Nifty BeEs, launched in 2002, is the first ETF that was launched in India. It tracks the benchmark index ‘NIFTY’